Where have all the $100 notes gone?

Shaun Drummond

The denomination makes up about 20 per cent of notes issued annually, but you can go years and not see one. Now the puzzle of who has our cash is translating to all denominations. The amount of money printed annually has not changed for years but cash use is falling.

Cash under the bed: One theory about the lack of $100 notes in circulation is that people are simply stashing it somewhere. Photo: Bloomberg

The Reserve Bank of Australia has conducted surveys of what payment options people use every three years since 2007. The latest, of around 1500 people who recorded how they paid for things over two weeks late last year, found that cash was used for 47 per cent of transactions in 2013, down from 62 per cent in 2010 and 69 per cent in 2007. Card use rose to 43 per cent from 31 per cent in 2010 and 26 per cent in 2007.

But the total amount of cash issued by the RBA has stayed rock steady as a proportion of GDP for years – in fact it has grown without adjusting for economic expansion.

ATM withdrawals have remained about the same – with some spikes and troughs – for the past decade. In April 2004, $10.3 billion was withdrawn in Australia. In April 2014, $11.7 billion was withdrawn. The total number of notes taken out barely budged from 61.7 million to 61.6 million in the same period.

This does mean fewer notes have actually been withdrawn as a proportion of GDP, which has not taken a backward step for 20 years, but it is unlikely this makes up for the reduction in cash changing hands.

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Discrepancies adding up

The short answer to these discrepancies is nobody really knows where it is ending up, as cash is hard to track. But the experts are working on some theories.

There were plenty of stories during the GFC of people drawing out cash to stick under the bed. Though it seems apocryphal, there have also been rumours of wads of bills found in safes or under beds following the Black Saturday fires in Victoria in 2009.

There’s likely a lot of truth to this. After a natural disaster, banks usually get a spike of requests to replace damaged bills. The Reserve Bank will replace the full or partial value of damaged bills with new ones to maintain confidence in the currency.

One explanation for the difference between note issuance growth and the flat figures for ATM withdrawals is that it seems a lot of $100 bills in particular leave the country – more so since the financial crisis.

Cash stash

Interest rates are even lower in many Western countries, making it even more worthwhile to literally hold cash. Although the Aussie dollar can be a volatile currency, it has stayed relatively high for several years now. For banks, the cheapest way to transport cash to meet this demand is in $100 notes.

You’ll hear more on this from commercial and official authorities as electronic transactions proliferate online, in person and in transport networks.

Banks, regulators and payment companies are keen to see the back of cash because its relative cost to the economy is rising. This is not just due to its use in fraud and tax avoidance. As the volume exchanged reduces, the fixed costs of making, distributing and handling it inexorably rise too.